Would Currency Appreciation Reduce the Trade Surplus?

Dongzhou Mei (), Ting Ji () and Liutang Gong
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Dongzhou Mei: School of International Trade and Economics, Central University of Finance and Economics
Ting Ji: School of International Trade and Economics, Central University of Finance and Economics

Annals of Economics and Finance, 2020, vol. 21, issue 1, 85-110

Abstract: We build a small open economy model with the financial accelerator mech- anism to investigate how currency appreciation affects trade imbalances. Con- trary to speculation that currency appreciation significantly reduces trade sur- pluses, our analysis suggests that currency appreciation would lead to a further trade surplus increase and a reduction in output for countries holding a large amount of foreign assets and importing a high proportion of non-consumption goods, such as China.

Keywords: Currency appreciation; Trade surplus; Financial accelerator (search for similar items in EconPapers)
JEL-codes: F3 F4 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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